Chicago wheat futures are poised for their longest sustained rally since April, driven by escalating supply threats from the Black Sea region and volatile weather patterns in key North American growing areas.
War Disruptions Threaten Global Grain Flow
The rally gained momentum following a series of Russian missile and drone attacks across Ukraine on Tuesday. Ukrainian officials reported the strikes killed civilians and damaged critical energy and port infrastructure in the Odesa region, a vital hub for grain exports.
This latest assault adds to a pattern of attacks targeting export facilities in both Ukraine and Russia, two of the world's largest suppliers of grains and edible oils. The ongoing conflict directly threatens to disrupt the flow of millions of tonnes of agricultural commodities to the global market.
Analysts at AgResource Co. noted that these infrastructure attacks have already slowed Ukrainian grain exports during December, tightening near-term supply prospects and supporting prices.
U.S. Weather Adds Another Layer of Uncertainty
Simultaneously, concerning weather is developing in the United States, another major wheat producer. The U.S. Department of Agriculture reported on Tuesday that record-setting warmth is accompanying dry conditions across the central and southern Plains.
While the warm temperatures may seem benign, analysts warn they pose a significant risk. The Hightower Report highlighted that "record warm temperatures across the southern Plains could be detrimental if cold air moves back into the area in January," a scenario some forecasters are predicting. Such a sudden shift could damage winter wheat crops that have not properly hardened against the cold.
On the Chicago Board of Trade, wheat prices responded to the dual threats, rising as much as 1.5 per cent. This marked the commodity's fifth consecutive session of gains, pushing prices to their highest level in over a week.
Sugar and Other Markets Also Active
The activity wasn't confined to wheat. In other soft commodity markets, raw sugar futures also saw gains. The most active contract rose as much as 0.92 per cent to US15.34 cents per pound in New York, reaching a two-month peak.
This move came as speculative traders reduced their bearish bets in the week ending December 16, according to U.S. regulatory data. Money managers also increased their net bullish positions in the London white sugar market to the highest level in 11 weeks.
Analyst Mike McDougall of McDougall Global View suggested speculators were covering positions by liquidating bullish bets rather than initiating new selling. Despite the recent uptick, raw sugar futures remain down nearly 21 per cent for the year, on track for their most significant annual decline since 2018.
Trading activity is expected to thin ahead of the Christmas holiday, with markets closed on Thursday. The combined forces of geopolitical instability and climatic uncertainty, however, are setting the stage for continued volatility in agricultural markets as the year concludes.
